Robson v. Robson
514 F. Supp. 99, 1981 U.S. Dist. LEXIS 11998 (1981)
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Rule of Law:
The original parties to a contract may modify or rescind a provision benefiting a third-party donee beneficiary if the beneficiary's rights are contingent upon a future event and have not yet vested, and if the beneficiary has not detrimentally relied on the promise.
Facts:
- Raymond F. Robson, Sr. ('Ray, Sr.') and his son, R. F. Robson, Jr. ('Ray, Jr.'), each owned fifty percent of P. B. Services, Inc.
- On July 23, 1975, they entered into a contract to provide for retirement payments for Ray, Sr. and the transfer of stock upon either's death.
- The contract stipulated that if Ray, Jr. died first, his stock would go to Ray, Sr., who would then be obligated to pay Ray, Jr.'s wife, Birthe Lise Robson ('Birthe'), $500 per month for five years or until she remarried.
- Subsequently, Ray, Jr. and Birthe experienced marital problems, separated, and Ray, Jr. filed for divorce in 1977.
- On February 21, 1979, while the divorce was pending, Ray, Sr. and Ray, Jr. modified their contract by drawing a line through the provision that provided for payments to Birthe, and both initialed the change.
- Two days later, on February 23, 1979, Ray, Jr. died of cancer.
Procedural Posture:
- Birthe Lise Robson sued her father-in-law, Raymond F. Robson, Sr., in the United States District Court for the Northern District of Illinois, seeking performance under the original contract.
- Both plaintiff Birthe Lise Robson and defendant Raymond F. Robson, Sr. filed cross-motions for summary judgment.
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Issue:
May the original parties to a contract modify or rescind a provision benefiting a third-party donee beneficiary, whose rights are contingent on a future event, before that event occurs and before the beneficiary has detrimentally relied on the promise?
Opinions:
Majority - Aspen
Yes. The original parties to a contract may discharge the rights of a donee beneficiary if the beneficiary's rights have not yet vested and the beneficiary has not acted in detrimental reliance upon the promise. The court distinguished between creditor beneficiaries, whose rights vest immediately to satisfy a pre-existing debt, and donee beneficiaries, who are receiving a gift. Birthe was a donee beneficiary, and her rights were contingent upon the death of her husband, Ray, Jr. Because her rights had not vested at the time the contract was modified, and there was no evidence that she had detrimentally relied on the promise of future payments, Ray, Sr. and Ray, Jr. were free to alter their agreement. The court analogized the situation to an undelivered gift, which a donor can revoke at any time before it vests in the recipient.
Analysis:
This case clarifies Illinois law by drawing a sharp distinction between the rights of creditor beneficiaries and donee beneficiaries. It establishes that a donee beneficiary's rights are not automatically indefeasible upon the creation of the contract, especially when those rights are contingent on a future event. The decision provides contracting parties with the flexibility to modify agreements concerning gratuitous promises to third parties, provided the modification occurs before the beneficiary's rights vest or the beneficiary relies on the promise to their detriment. This ruling is significant for contracts involving family arrangements, estate planning, and business succession, where circumstances may change before a promised benefit becomes due.
